FAMILY FIRMS VENTURING INTO INTERNATIONAL MARKETS: A RESOURCE DEPENDENCE PERSPECTIVE

Abstract

In today’s global marketplace there are competitive pressures for all firms to internationalize. Family firms face specific resource challenges when it comes to their internationalization. Many of these challenges are inherent in their governance structure, which tend to distinguish them from other types of firms. Drawing on resource dependence theory, we expect the degree of openness/closeness in the governance structure of family firms to influence internationalization. We view family firms with an open governance structure as those with external owners, external CEO, external board members, and large top management teams. Longitudinal data from 325 family firms reveal that expansion across foreign markets (i.e. international scope) is favored by opening up all levels of the firm’s governance structure, that is by having external ownership, external board members, external CEO and large TMTs. Penetration within foreign markets (i.e. international scale), on the other hand, is favored by opening up the top management level alone, that is by having an external CEO and a large TMT. These results encourage further looks into the resources that non-family actors bring to the business and their contribution to internationalization strategies. INTRODUCTION Globalization has altered the nature and scope of strategy and competitiveness for most firms (Melin, 1992; Zahra & George, 2002). Increased market liberalization, the use of information and communication technology and innovative supply chain management practices have increased the opportunities to internationalize for all enterprises (George et al., 2005; Westhead et al., 2001), including family firms (cf. Fernandez & Nieto, 2006; Tsang, 2002; Zahra, 2003). The international business (IB) literature suggests that firms need to be well equipped with resources to successfully compete in international markets (Dunning, 2000; Eriksson et al., 1997; Peng, 2001). Venturing into international markets seems to pose specific resource challenges to family firms (Tsang, 2002). While factors such as commitment, long-term orientation and unique capabilities may enhance the internationalization of family firms (Gallo & Sveen, 1991; Zahra, 2003), the lack of resources may hinder family firms from seizing global opportunities and dealing with the complexity inherent with international expansion. Researchers have, for instance, noted that the lack of managerial resources (Fernandez & Nieto, 2006; Graves

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